Employee asking compensation for working extra hours back in 1 year

Question

I am a manager and one of my direct report surprised me in the end of the year. She told me she worked ~120 hours extra throughout this year and asking for some form of compensation. This was the first time she told me she takes extra hours. If I would have known it before, I would have found a solution that she balance it out before it is piling up so much.

Her answer why she couldn't balance it out was the too much urgent work that she got.

Should I fight out a compensation for her or should I refuse saying it is a late notice?

I am tempt to pay it out but make sure she doesn't repeat the same process again and notify me in time if she cannot manage her time next year.

General expectation from employee like her: normal full time employee with ~40 hours/ week, flexible self management of working hours. Expectation from company is to report the 40 hours/ week for tasks, no more or less. current work arrangement is home office.

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Update: Thank you all for the helpful thoughts and feedback. She got compensation only for the last month (December where she reported this). Also, as the accepted answer proposed, I found another way to compensate her: to include her hard work and extra hours in her yearly employee evaluation. This is useful for future promotions.

Answer 1

This is a challenging situation. The employee wasn't authorized to work the extra ~2.4 hours per week, and they didn't mention it for the entire year. That's against your stated policy. You really can't pay that out, especially not all in one wad - and if you tried, I would expect your director to come down on you for it. (I am a director of engineering, and if one of my managers suddenly paid 120 hours of overtime to someone they'd be hauled in front of me immediately.) It wasn't properly and promptly tracked and reported, so in no way can you pay it out (consult local laws, but unapproved overtime is very seldom payable).

However, not paying it out will come with a significant morale hit, especially since (assuming good faith) the employee thinks they were doing a good thing by doing this additional work. While it's true that they were basically violating policy the entire time, if they are a good worker you need to have an "up side" to the messaging too.

What I would do in this situation is figure out what your org allows in terms of discretionary bonuses or other bennies. I'd say "I appreciate all your hard work to make our projects successful. Overtime can only be done with approval and has to be reported that pay period, so I can't pay that out as overtime. Going forward please don't work more than 40 hours without my explicit approval. But what I can do is thank you for your initiative with a discretionary bonus of $X!" Ideally $X is meaningful, about a thousand dollars for a US-based professional job. Or talk about upside to performance review, or if there's some other end of year bonus that people get, an enhancement to that - depends what levers you have to pull.

You want to retain that employee but you have to make it super clear they can't basically spend company money without approval, which is what 120 hours of unapproved and undeclared overtime is.

Now that there's a country tag, we can clarify that legally you are most likely NOT required to pay unapproved overtime, per Forbouys Ltd v Rich, 2002.

Answer 2

Her answer why she couldn't balance it out was the too much urgent work that she got.

If I were her manager, I would want to know about this "too much urgent work" when it occurred, rather than saving it up for a year end surprise.

I am tempt to pay it out but make sure she doesn't repeat the same process again and notify me in time if she cannot manage her time next year.

That seems reasonable to me, assuming you trust her analysis and don't feel that she is trying to take advantage.

I would be stern and warn her that she must indicate extra hours weekly in the future and that you won't repeat this sort of payout again. And I would require a weekly Status Report indicating hours spent, so that I could avoid this situation in the future.

Answer 3

The employment contract could very well contain a clause for "reasonable" overtime.

It would really depend on my relationship with my direct report. Finding a middle ground could be justifyable.

Fundamentally by not disclosing the overtime, the employee has not given the business the ability to address the additional workload. Under UK law, an employer has the right to stop overtime from being worked.

This is a form of Time Theft.

Answer 4

In the UK, the employee may have one big problem: They have to get paid for every hour they work, by law, but they only have to get paid minimum wage. So if you make twice the minimum wage, you can't force the company to pay overtime until the overtime is the same as your regular hours. You can however, refuse to work overtime if you don't get paid extra for it. What happened here, doing overtime secretly and then showing the bill, will only work if your job is minimum wage or close.

On the other hand, since this is "workplace" and not "law", the manager should look at the facts and whether the employee has actually done useful work for the company. If things were delivered to customers quicker, problems solved quicker, waiting lists disappeared because of the extra work done, and the company overall benefitted from the extra work, then the manager should talk to their boss and see what the outcome is.

Answer 5

This need not be a difficult situation.

Firstly, the decision to pay this should not be at the manager's discretion, it has to be put through corporate HR, if your org. is large enough or through an HR lead, to ensure policies are consistently applied. The manager should simply say in the first instance that this will need to be sent to HR for review. This protects the manager's relationship with the employee. If HR says it's up to the manager's discretion then you can go with your gut.

Secondly, it's either in the employee's contract and owed to her, or her contract, like many, has a clause that states no overtime will be paid unless approved in advance. HR will let you know your standing here as well as any associated labour laws in your jurisdiction.

And thirdly, while 120 in a year seems a lot, pro-rated it is only 2.4 hours a week. If you pay this employee for these additional unapproved hours it equates to a 6% bonus. What about all the other staff members who also work the odd extra hours here and there? Will you also ask them to submit any hours they have worked also?

In the end, if you don't have to pay, you still have to decide what feels right. I would consider paying a small honorarium now and allow her to flex her time in the future.

Answer 6

This depends on a few circumstances:

1. Is this employee salaried? In many countries (unsure if the UK is one of them), salaried employees are not entitled to overtime pay, and "occasional overtime" is considered part of the job. That said, "occasional overtime" does not constitute 120 hours per year, that's a lot more than "occasional". That said, you may have an out here if your employee is salaried (whether you should take that out, however, is another story entirely)

2. Did you ask this employee to work this amount of overtime or did they do it on their own? If you asked them to work the overtime (giving them additional responsibilities to the point that they could not have possibly completed their work during normal hours constitutes as asking them to work overtime implicitly), then it's your responsibility to compensate for the overtime; however, if they worked the overtime by their own volition then it's their responsibility to manage their own work-life balance and their inability to do that is not your responsibility.

3. Does the employee have documentation to show that they worked the additional hours, and/or are you confident that they are not lying? Especially in the current work-from-home climate, it's difficult to know precisely how many hours people are working. Do you believe that this employee is being truthful, and if you do not believe so, do you believe they have documentation to prove you wrong?

These are the questions to consider when determining how much to compensate the employee. There is a tradeoff here; if you compensate them less (or not at all), they will experience a drop in morale and be unwilling to e.g. work as hard, or work overtime, or take initiative, or etc in the future. However, you also don't want to compensate them for their own issues, e.g. for unrequested overtime, because that's not your problem. You also want to make sure you're working within established company protocols and don't want to put yourself in a precarious position with your managers.

Without knowing the answer to the above questions, I can't actually say definitively whether or not, or how, you should compensate this employee. However, these are things you should consider when you decide how or whether to do so.

Answer 7

There is a big problem in your company, organisationally speaking. You are not tracking the hours your employees work, and now you are surprised that you didn't see a backlog of overtime coming. One could very easily argue that this is a problem of your own making.

"we don't track hours. We expect all employee to be flexible and manage their time so that they don't work more or less"

This is a problem of your own making then, as the company chose to not follow up on work time. If you'd said the same about the money kept in the registers; would it then be surprising if at the end of the year you suddenly realize some of the money is missing?

Expectation from company is to report the 40 hours/ week for tasks, no more or less.

While this can be interpreted to mean that overtime was not permitted, which swings this issue in your favor, I have some concern over the phrasing that the expectation is to report 40 hours, not to work 40 hours. That is a significant difference.

Some companies enforce strict hour reportings, even if the reality is more flexible. I have worked at several companies where hours were flexible (40h per week, worked whenever), but the expectation was to report exactly 8 hours every day, even if that was not the reality.
In that sense, it can be argued that your company's expectation is not about the hours effectively worked, but about the way in which regular working hours are booked.

Work is done in sprints with task items, managed by the team on an online platform. That is the place to monitor work. That board unfortunately does not tell me who worked how many hours a week.

So in essence your company does not differentiate between work spent on a project and time worked? I.e. there is no accounting for non-billable time spent, ever?

Because if there isn't, I'm not surprised that staff would be working overtime at a regular rate. It starts suggesting that this staff member was more true to their billable project hours compared to the ones who didn't clock overtime.

Furthermore, using sprints supports the employee's argument that the overtime is warranted. You assigned them a certain amount of work (the sprint load) by a certain deadline (the sprint end).

With no further time management from your end, and with employees being left to manage themselves and their own time, it is perfectly reasonable that an employee would work overtime to ensure the scheduled work is delivered by the scheduled deadline.

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As to the legalities, I am not a lawyer. I don't know if you can stiff this employee (fully or partially), or if the employee can force you to pay the overtime, or if you are able to offer alternate solutions (e.g. time off instead of extra pay).

But if you approach this topic in any way that isn't agreeable to the employee in question, be very wary of the impact this is going to have on your entire team. If you stiff her in any way, word is going to reach the other team members and you are likely to never get anyone to work any amount of overtime ever again nor go beyond their described role, without first asking for written confirmation that it will be paid out.

Even if you would pay it out in those future cases, it's going to put a strain on team morale.

The lesson learned

What you should take away from this experience is that you should have pro-actively managed this, instead of leaving it up to blind assumption. You should have either explicitly prohibited overtime or capped it, and you should definitely follow up on worked hours more than once a year.

Since any impact on morale is an issue to you, and if you believe the employee's claim to be genuine, it might be better here to simply pay her for her overtime and make it clear to the team that from this point on, no overtime is permitted unless permission was explicitly given.